Commentary: Specialty Pharmaceuticals: An Introduction

DECEMBER 01, 2008

Russel Allinson, RPh, MS

Pharmacy Times is pleased to introduce
the first in a series of regular commentaries
regarding the state of the field of specialty
pharmacy. Many pharmaceuticals in this
category provide sophisticated treatment
for patients with complicated illnesses,
such as multiple sclerosis and rheumatoid
arthritis. Although the cost of these drugs
is high, this sector of pharmacy is seeing
tremendous growth. Pharmacy Times will
continue to bring you regular updates in
this field—the following is the first in the
series from Russel Allinson of Therigy, LLC,
the health care industry's trusted source for
information, resources, and advisory services
on specialty pharmaceutical and highcost
therapies.

Specialty pharmacy today represents
the fastest growing segment
of pharmacy spending and is one
of the fastest growing segments in all
of medical costs. The spending growth
for specialty drugs accounted for nearly
25% of the total growth in drug spending
in 2006, making it the largest category
driving drug spending. Specialty pharmaceuticals
spending in 2008 is estimated to
be $85 billion, according to IMS Health.
Total spending in 2010 is estimated to
be $100 billion—representing a growth
of nearly 18% over the next 2 years. This
growth is fueled by the increased use
of existing therapy for more patients,
expansion of indications for existing
products, and of course a robust pipeline.
The specialty pipeline is estimated
to have 600 products in trials.

The origin of specialty pharmaceuticals
can be traced to 3 different events. The
first was enactment of the Orphan Drug
Act of 1983 to encourage pharmaceutical
manufacturers to investigate therapies
that would treat conditions that affected
smaller groups of patients (<200,000). The
law offers a drug developer certain financial
benefits and incentives in exchange
for researching, developing, and getting a
drug approved for a rare disease or condition.
Since 1983, over 325 orphan drugs
have been approved by the FDA.

Secondly, advances in biologic technologies
fostered the creation of specialty
products. No longer were drug
discovery and production limited to
chemical processes; advances in biologic
processes enabled the development
of drugs produced by biotechnology.
Lastly, the development of genetic
coding technology, discernment of the
human genome, and an understanding
of the genetic basis of disease, in
conjunction with the aforementioned
events, propelled the rapid development
of biotech medications.

Although no specific criteria exist to
define a specialty product, the following
attributes are agreed as belonging
to the class:

Expense. As a general rule, specialty
therapy costs between $20,000 and
$25,000 per year but may range up
to $250,000 or more.

The product is used to treat a chronic
condition (with a few exceptions);
patients treated with specialty products
may expect to be on a lifetime
of therapy.

Because the products are often
made up of large molecules, they
are susceptible to degradation by
the gut and, therefore, are most
often administered via a subcutaneous
or intramuscular injection or an
intravenous infusion.

Billing. In the past, because these
drugs were often administered in
the physician's office, the physician
billed the drug to the patient's medical
benefit with an administration
fee. This practice resulted in these
products having a very cumbersome
reimbursement process, which few
community pharmacies had the
knowledge or desire to follow. This
attribute alone may have been the
reason initially that specialty products
migrated to specialty pharmacies
that had the systems, processes,
and knowledgeable staff to manage
this complex reimbursement system.

Special handling, dosing, and patient
support requirements.

Given these attributes, it is easy to
understand how these products migrated
to pharmacies with the financial resources
and the technical and professional
experience to manage them successfully.
Specialty pharmacy has often
been compared with medicine, where
a specialization "an inch wide and a
mile deep" develops quickly. Two early
examples in the 1990s were Accredo and
Stadtlanders, who grew multimillion-dollar
businesses based on 1 or 2 therapies.

As knowledge of specialty pharmacies
grew, manufacturers with new specialty
products sought them out as ideal pharmacies
to launch their new products,
further reinforcing the concept and adding
to their reputation. Discussion of
these new products will be a subject of
future articles.